NEWS

New value of prices: market reference value

13Apr

Everyone knows as a daily matter, those of us as professionals dedicated to the real estate sector, that we have to play around with the different types of property values.

One thing is the market value of a property, that may be more or less, depending on the offer and demand. Today, for example, the market value in the Balearic Islands is quite high, as can be seen in the property selling advertisements.

Another thing (very) different is the land registry value allocated to each property, that has nothing to do with the market value. This is more of an administrative value to be used as the base for the calculation of different taxes, as for example the Council Rates Receipt (IBI), tax on the increase of urban land value (plusvalía), Personal Income tax (IRPF), Non residents personal income tax (IRNR), etc.

Additionally, with the land registry value (and other details) it is also possible to calculate the value assigned by the Income Tax Office to a certain property in order to calculate taxes such as for example the Transfer Tax and Legal Acts (ITP y IAJD), Inheritance and Donation Tax (ISD). When we pay these taxes below the value assigned by the Inland Revenue Office, we take the risk that during the next years we could receive a notification from this office requesting the payment of tax for the non declared part, as well as interest and fines.

So, we have recently seen in different news media that in the Budget project it is intended to adapt the land registry value to the market value, which in practise would mean a very important increase of the Rates receipt (IBI) or the tax on increase of urban land (plusvalia). However, the Treasury Office and Public Duty have just issued a statement denying this publication. 

This Treasury department have stated that what they wish to bring into force is a «new real estate market value, different to that of the land registry value, that does not change and that is the only one to be used as the basis for calculated the rates receipt (IBI), whereby under no circumstances would it suppose an increase of any tax, which only comes under the control of the Town Halls. The new market reference value arises to strengthen the legal security and transparency. It will be a very useful tool to control fraud. The new reference value will be offered as an index, guarantee and transparency in the real estate market. It will be calculated by the Land Registry office from the real estate selling prices through communication by the public notaries and will be checked through other sources of information. It will be at the disposition of all Public Departments and citizens».

In any case, at present it is still a project. When the budget is finally approved and this new value comes into force, we will inform you and study the implications of same in our day to day. 

 

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